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Can we trust 'made in China'?

China's latest food scandal is a reminder that safety comes at a price.

22 Jan 2009 08:17 GMT

In three decades China has come from nowhere to being the factory of the world [EPA]

In the 1980s, when China began to open its economy to the outside world, Chinese exports rose on average by 5.7 per cent a year.

By the 1990s, that figure grew to 12.4 per cent, soaring to 20.3 per cent between 2000 and 2003, and hitting 26.7 per cent in 2006.

Consumer boom

Backed by its vast army of cheap labour, China's export-driven economy has created an unprecedented consumer boom that has encompassed the globe.

According to the International Monetary Fund, China's export growth rate has been seven times that of the rest of the world in recent years.

As a result goods made in China have transformed the way the world shops.

From the mega-malls of suburban America and Europe, to the bazaars of sub-Saharan Africa, products that might once have been out-of-reach luxury for many consumers have become an everyday affordability for the masses.

The tainted milk scandal has again raised safety fears [GALLO/GETTY]

All thanks to China.

Now, for example, a DVD player can be bought for barely more than the cost of one of the DVD movies to play in it.

Laptops, cellphones and other modern essentials all owe their prevalence to the fact that Chinese factories have been able to churn them out at an unbeatably low price.

It has become the basis of our throw away society - an apparently infinite Aladdin's cave of goodies; the answer to the dreams of the world's shopaholics.

But recently the sheen on this low-cost treasure has shown signs of wearing off.

Safety fears

A series of safety alerts and product recalls have raised fears over Chinese-made goods ranging from toothpaste and processed shrimp to Thomas The Tank Engine toys.

Now, we are again seeing China battle a rapidly growing scare over dairy products contaminated with the toxic chemical melamine.

Suddenly, it seems that the 'made in China' label might not be such good value – and may even be deadly.

Western politicians and many pundits in the media have seized upon the issue to engage in a bout of China-bashing, accusing Chinese manufacturers of ruthlessly cutting corners in pursuit of profit at any price.

Certainly in some cases that has an element of truth to it.

Chinese consumers themselves are all too familiar with cases of fake or untested – and often deadly – goods.

Four years ago, another scandal surrounding baby formula claimed the lives of dozens of infants.

An investigation found that the formula had no nutritional value whatsoever – apparently part of a get-rich-quick scheme.

Such cases are inexcusable and the latest scare over dairy products shows, once again, that China's monitoring and regulatory oversight of its fast-growing economy leaves much to be desired.

'Chaotic'

Chinese producers face constant pressure to cut costs [EPA]

China's cabinet admitted earlier this week that deep, systemic failings were to blame.

"[The scandal] has shown us that the dairy market is chaotic, flaws exist in supervision mechanisms and supervision work is weak," China's leaders said in a statement released on state TV.

But many Chinese manufacturers also complain they face immense pressure from their giant multinational customers - not just to keep their prices low, but to repeatedly cut them, and to cut them again.

Faced with growing wage demands from their workers, they are caught in a "Catch-22" situation.

At the same time Western governments have protested indignantly at China's failure to enforce product safety laws demanded by the West.

Many conveniently overlook the issue that, for years, they have helped fund tax cuts by freezing or cutting funding to their own agencies meant to monitor the safety of imports.

Question of confidence

It is, perhaps, a case of wanting to "have your cake and eat it".

The world demands cheap goods, but is unwilling to pay the price that covers the cost of producing them safely, or to put the monitoring systems in place to ensure standards are kept to.

The uproar has understandably put China's leaders on the defensive; export trade is the backbone of China's economic growth, and the continuation of that growth is what China's leaders base their legitimacy on.

That, in turn, depends on China's manufacturers moving up what economists call the "value chain" – essentially, making more expensive, more sophisticated goods that draw a higher profit margin.

But to do that successfully requires confidence in Chinese-made goods.

Confidence, ultimately, depends not just on low price, but on reliability and safety - and safety, as has become all too clear, comes at a price.